Portugal Bailout is Coming

Update: The Portuguese Prime Minister has announced that he would officially seek an EU bailout.

Portugal will need a bailout, said outgoing Finance Minister Fernando Teixeira dos Santos to Jornal de Negocios, a Portuguese business publication.

The European Union, however, has not yet received any official bailout requests from Portugal, although Portuguese officials have begun preliminary talks with the European Commission about short-term financing programs, reported Financial Times.

The international community and financial markets had anticipated Portugal would eventually seek a bailout – similar in style to the ones given to Greece and Ireland – ever since lawmakers in the country voted to reject an austerity package.

That package would have cut Portugal’s government spending, which may have inspired the market’s confidence in the country’s budget situation and maintained demand for Portuguese government debt.

After the austerity package was rejected – along with the current administration of Prime Minister Jose Socrates – the borrowing rate for Portugal steadily rose to unsustainable levels.

Now, Teixeira is acquiescing to the obvious.

Teixeira also blamed opposition lawmakers for rejecting the austerity package.He said: “in this difficult situation, which could have been avoided, I understand that it is necessary to resort to the financing mechanisms available within the European framework.”

He also said: “the country was irresponsibly pushed into a very difficult situation in the financial market.”